Bharti Airtel, India’s largest telecom company by revenue, reported further erosion in its revenue and profit in September quarter compared to the previous June quarter.
The company reported revenue of 21,777 cr, down 12.3% compared to a year ago and down 0.8% compared to the previous three months of April to June.
Profit before exceptional items and tax fell 12.3% on quarter and a whopping 53% compared to last year.
Net profit came in at 586 cr, or just a third of the Rs 1,615 cr that the company recorded in the same quarter last year. In the previous three months of April to June, the company had a net profit of 618 cr.
Average revenue per user fell to 145 per month from 154 in the previous quarter and 188 in the year-ago quarter. This is now below the Rs 156 per month that an average Jio user is paying to his operator.
SILVER LINING
Operating profit, however, improved on a quarter on quarter basis as the company sharply reduced marketing and promotional expenses and ‘other expenses’ as well.
The network operating expenses were also cut down as Bharti Airtel fought to stay fit in a market that no longer afforded any quarter for flabby players.
As a result, total operational expenses fell 2.4% compared to the immediate previous quarter. This was a bigger fall than the 0.8% decline seen in the sales.
As a result, operating profit increased to 7,977 cr this quarter from 7,807 cr three months earlier. Of course, it was still well below the 9,460 cr seen in the year-ago quarter.
INCREASING DATA USE
The second silver lining was higher usage for data.
The company had seen a sharp decline in data users due to the shifting of customers to Jio. But the quarter saw total number of mobile broadband (3G+4G) customers go up by 13% compared to the preceding three months and 34% compared to a year ago.
Total mobile broadband customers were now at 55.22 mln, up from 48.91 mln in the preceding quarter. For Jio, the number was around 110 mln at the same time.
The number of 2G-only data users fell to 10.5 mln from 21.3 mln last year — also an indicator of the 4G revolution in the market.
Similarly, an average data user on Airtel consumed 4 GB of data per month, compared to 2.6 GB in the previous three months and less than 1 GB last year.
The total number of 3G+4G base stations was 2.26 lakh at the end of September, compared to 2.03 lakh three months earlier.
India revenues for the quarter was Rs 16,728 crore, down 13.0% Y-o-Y.
“Mobile market continues to experience value erosion and financial stress led by competitive pressures. Mobile data traffic has grown fourfold to 784 Bn MBs in the quarter as compared to 178 Bn MBs in the corresponding quarter last year. Mobile broadband customers increased by 33.6% to 55.2 Mn from 41.3 Mn in the corresponding quarter last year,” it said.
RISING DEBT
The company’s consolidated net debt has increased to Rs 91,480 crore from Rs 87,840 crore in the previous quarter.
Capex investments stepped up in the quarter behind both data coverage and capacity.
Net debt excluding the deferred payment liabilities to the DOT and finance lease obligations has increased by Rs 2,554 crore sequentially in the quarter.
Net debt to EBITDA ratio (LTM) for the quarter at 2.91 times (vs 2.67 times in the previous quarter).
Lower EBITDA along with rising spectrum costs and continued investments in India have resulted in deterioration of Return on Capital Employed (ROCE) to 5.1% from 7.4% in the corresponding quarter last year.
COMMENTARY
Gopal Vittal, MD and CEO, India & South Asia, said the company’s financial stress will be further accentuated by the reduction in IUC rates in the next quarter.
Interconnect charges were cut by over 50% with effect from Oct 1.
“This will eventually force operator consolidation and exits as we have witnessed in the recent past. Airtel remains committed to its goal of increasing revenue market share in this competitive environment by providing superior customer experience and strategically investing behind building more data capacities.”